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When it comes to index pricing of liquefied natural gas (LNG) around the world, East doesn't meet West, and that's not likely to change, according to John Hattenberger, president of Gazprom Marketing & Trading, the U.S. arm of Russia's OAO Gazprom.

The fact that there are different pricing mechanisms for the world's regional liquefied natural gas (LNG) markets -- Asia, Europe and the United States -- inhibits the development of a global gas market, some say. Meanwhile, the combination of the recession and the price linkage of LNG to oil in Asia and Europe has created a disparity between term prices in the East and spot prices in the West, so much so that some have called for a single pricing mechanism for LNG. However, that's not likely to happen, Hattenberger told NGI on the sidelines of Intelligence Press Inc.'s GasMart 2009 in Chicago.

In Asia LNG prices are indexed to the Japan Customs Clearing (JCC) price. In Europe LNG contracts are indexed to a spot gas and fuel oil combination, and in the United States, Henry Hub is the benchmark. And that's how Hattenberger thinks it will stay. For one thing, there is a large number of existing 20-year contracts among numerous buyers and sellers, all with different dates of expiration.

"You really have to have a wholesale shift," Hattenberger said. "The question is, how do you get all of those buyers and sellers to agree to go to something else? And what is the something else going to be? A lot of people say oil isn't really a very good proxy for Japan's energy needs.

"Well, the fact is it is a good proxy because their alternative is to go out in the market and buy oil and fire their power plants with oil. They're not going to do that, so what's a better substitute? Why don't they base it on Henry Hub pricing? Well, Henry Hub pricing to the Japanese is meaningless because we're never going to move Henry Hub gas to Japan. Right now there isn't anything better for them to go to; it's a fact."

Gazprom Marketing & Trading is expecting to begin North American gas trading operations in its Houston office in October, Hattenberger said. The office currently has about a dozen employees and will soon have approximately 25, he said (see related story). "We're in hiring mode now."

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Natural Gas Intelligence (NGI), is a leading provider of natural gas, shale news and market information for the deregulated North American natural gas industry. Since the first issue of Natural Gas Intelligence was published in 1981, NGI has provided key pricing and data relied upon daily by thousands of industry participants in the U.S, Canada and Mexico as well as Central and South America, Europe and Asia.